Prabhat Dairy. B2C Growth Strategy. Lazaridis Consulting Elly Bradley, Taylor Hansen, Kiri Olekas, Christina Wilson

Transcription

1 Prabhat Dairy B2C Growth Strategy Lazaridis Consulting Elly Bradley, Taylor Hansen, Kiri Olekas, Christina Wilson

2 Facing the analysts What should the balance between B2B and B2C sales be for Prabhat? How should Prabhat deal with distribution and branding of value added B2C milk products? Ensure stronger financial position with working capital & cash for future growth

3 Product market focus needs to change Strong end to end sourcing to selling value proposition Low price strategy Supplier / Customer of Choice

4 B2C expansion strategy Reduce B2B to B2C ratio Focus on value-added, increase capacity utilization Use Kiranas

5 Key assumptions B2B sales include sales to restaurants, factories, MNCS e.g Cadbury for use in chocolate B2C sales are through retail channels to the consumer Any current marketing efforts will continue as scheduled (Project Raftaar & B2B strategies)

6 Profits drop significantly Revenue 10,043 11,720 12,261 12,885 13,605 Operating Expenses 8,743 10,231 11,559 12,147 12,826 Personnel Cost Depreciation Interest & Financing Cost Provision for Taxation Profit after Tax All financials in million Rs

7 Analysts are correct about Prabhat s future Full utilization on B2B product production Expected growth in milk pricing Out of cash by end of FY2017

8 Not hitting many internal and external targets KPI Where We Are Where We Need to Be Gross Margin 22.4% >20% Accounts Receivable Days 76 <50 Value-Add Processing Capacity 20% 70% B2B:B2C Ratio 70:30 50:50

9 Need to act quickly Operational Performance Time

10 The market is attractive and growing Floor prices control the low price strategy Rising incomes are driving industry growth Largest portion of consumers are rural Buffalo is more profitable than cow

11 Well positioned for growth Excess production capacity in value-added milk products Competitive consumer pricing Innovative distribution models Strong relationship with Kiranas as mini stockist

12 Need to align capacity utilization to market Litres of milk products Capacity for value added products Non raw form Raw form Utilized Non-utilized

13 Weaknesses have contributed to crisis Declining working capital Need to raise cash Marketing is a growing competency Principle product is currently B2B (powered milk)

14 Demand exceeds supply. Strong market growth anticipated Demand will grow by 10% Food is 51% of personal income expenditure Dairy is a food stable Supply will grow by 7% New Zealand exports Fodder price is increasing and quality is decreasing Competition has strong buying power

15 What does the strategy look like Increased profitability Reduce working capital Improves brand awareness Improves market share Management goals Financial objectives Turn around weaknesses Turn around weaknesses

16 Creating the strategy Should Prabhat extend B2C Where should Prabhat focus Which product should be expanded How does Prabhat execute

17 Should Prabhat extend B2C Capacity is maximized on B2B products such as milk powder and condensed milk Well established with B2B; opportunity to expand brand with B2C Utilize distribution core competency to expand relationship with rural retail stores

18 Which product should be expanded Value added products Largest excess capacity (80%) Highest margin products Poly-pack milk Declining market Opportunity to generate cash by selling excess manufacturing equipment Condensed Milk / Milk Powder B2B product Expansion would require additional capital

19 Where should Prabhat focus Kirana Rural market is growing Strong presence in Tier 1, 2 & 3 cities Kiranas are located in both urban and rural 15,000 Kiranas, 10,000 in urban Chain Retail Less control over marketing strategy Only focused on urban Mini stockist program too expensive

20 B2C expansion strategy Reduce B2B to B2C ratio Focus on value-added, increase capacity utilization Use Kiranas

21 Need to attack the working capital issue Since there is a limit on our cash flow, the focus needs to be on increasing the money available and starting to increase brand awareness in the first 6 months

22 Need to attack the working capital issue Task Responsibility Cost Key Metrics Establish price for selling Polypack equipment Hire Sales & logistics in Mumbai Build sales model to include relationship and debt management Designate additional kiranas as mini stockists Expand branding & marketing team for B2C Finance / Engineering HR Business as usual (BAU) Rs/hire -500,000 Rs total Price for manufacturing equipment 100 Hired Market planning BAU Model complete for rural market Sales Included in marketing campaign HR / marketing -14,000 Rs total 2 Hired Increase by 100 mini stockist

23 Need to attack the working capital issue Task Responsibility Cost Key Metrics Board of Director meeting manufacturing capacity Secure contract with available partner for excess capacity Launch mini stockist model Launch B2C marketing campaign. Includes expanding project raftaar Vivek, MD BAU Decision made to sell excess polypack capacity Increase utilization of VA MD +215 Million Rs Excess Capacity Sold Sales VP Incurred previously 10 Hired Decrease accounts recievable Marketing VP -100 Million Rs Campaign launched

24 Focus on value-added B2C Within the next 6-12 months, since the marketing campaign has been launched the focus will be on monitoring and course correction as needed.

25 Focus on value-added B2C Task Responsibility Cost Key Metrics Increase utilization of value added capacity Hire sales & logistics for rural area continue to expand on this model Continue with branding & marketing campaign for B2C Milk magic & Flava Monitor manufacturing capacity to ensure efficiency course correct if needed Manufacturing Lead Sales VP HR BAU Increased utilization Increased VA sales -250,000 Rs 50 Hired AR decreased Marketing VP Incurred previously Increased awareness Operations BAU Increased utilization

26 Focus on value-added B2C Task Responsibility Cost Key Metrics Monitor marketing campaign data analytics course correct if needed Marketing VP BAU Increased brand awareness Monitor financials Finance BAU Increase profitability Decreased accounts receivable Increased market share Continue with project raftaar and mini stockists program Marketing & Sales BAU Decreased accounts receivable Increased market share

27 Financial Assumptions B2B business maintains revenues during this period B2C products are higher margin (30%) than existing products Market growth maintains previous CAGR (15% for product mix) Milk prices grow at 8% as forecasted Marketing expenses are maintained at 50% of initial launch Salaries increase at 10% per year for new hires

28 Project Costs Revenue from equipment sale: 214M Rs Marketing Campaign: -100M Rs Total Salary Increase: -0.8M Rs Project is net positive without revenue increases: 113M Rs

29 Project returns company to profits Revenue 10,043 11,720 12,621 15,948 17,670 Operating Expenses 8,743 10,231 11,899 14,021 15,409 Personnel Cost Depreciation Interest & Financing Cost Provision for Taxation Profit after Tax

30 Reduces reliance on B2B sales 80% 70% 60% 50% 40% 30% 20% 10% 0% Percentage of Sales from B2B

31 Hitting or exceeding targets KPI Where We Need to Be Where We Will Be 2019 Gross Margin >20% 26% Accounts Receivable Days <50 49 Value-Add Processing Capacity 70% 70% B2B:B2C Ratio 70:30 50:50

32 Key risks & mitigations Kiranas do not pay on time Increase training and awareness for debt collection with sales team Work with retailers to help them understand problems and determine solutions Cost of milk procurement increases Develop formal supply contracts for Fodder with farmers

33 B2C expansion strategy Reduce B2B to B2C ratio Focus on value-added, increase capacity utilization Use Kiranas

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